USD/CAD to move higher, especially on a six to twelve month horizon – Danske Bank

Analysts at Danske Bank, forecast the USD/CAD will rise gradually over the next months, reaching 1.27 in a year. They see more strength in the US dollar two quarters from now. 

Key Quotes: 

“Despite the spill-over from a weakening USD the CAD has seen strong support over the last month from global reflation, higher commodity prices and Bank of Canada tapering bond purchases and signalling an earlier rate hike (in 2022).”

“We still think USD/CAD is best treated as a low beta version of USD/NOK. On the back of our call for a lower EUR/USD in the medium to long term, we expect USD/CAD to move higher especially on a 6M-12M horizon. Also, we pencil in a sharper rise in USD/NOK than CAD/NOK as CAD will remain more supported in an environment of broad USD strength than what is the case for NOK.”

“We forecast USD/CAD at 1.21 in 1M (from 1.26), 1.22 in 3M (1.27), 1.25 in 6M (1.29) and 1.27 in 12M (1.31).”